What: UK retail sales growth slows to 1% in May 2025, with food sales rising 3.6% while non-food sales decline 1.1%, reflecting shifting consumer priorities amid economic pressures.

Why it is important: The slowdown signals a crucial turning point in retail performance, particularly significant as retailers face £7 billion in additional costs from regulatory changes while navigating changing consumer preferences.

UK retail sales growth decelerated to its lowest rate in 2025, reaching just 1% in May, well below the January-May average of 2.5%. Food sales demonstrated resilience at 3.6% growth compared to 2.8% in the previous year, while non-food sales declined by 1.1%. Physical non-food stores saw a 0.9% decrease, and online non-food sales fell by 1.5%, contrasting with positive growth in 2024. Online penetration held steady at 35.9%. The gaming sector emerged as a bright spot thanks to new releases, while fashion and big-ticket items struggled amid lower consumer confidence. Retailers now face mounting challenges from increased National Insurance contributions, wage costs, and upcoming packaging taxes, totaling £7 billion in additional expenses.

IADS Notes: Market analyses from March 2025 showed promising signs with strong non-food store performance at 3.1%. However, April data revealed declining consumer confidence, with 75% of businesses planning price increases. This shift aligns with the National Retail Federation's forecast predicting slower retail growth of 2.7-3.7% for the year. The current performance suggests a significant transformation in consumer behavior, particularly as households adjust to essential bill increases while maintaining selective spending on specific categories like food and gaming.

UK retail sales slow as consumers put the brakes on discretionary spending